"Incorrect syntax near the keyword 'WITH'" in a function returning XML with CTE expression

I am trying to write a function to support some (legacy) SQL code, function will be used as a part of a query:

SELECT
  q.*,
  fn_qncatxml(q.number, q.version) AS categories --XML aggregated category hierarchy
FROM
  [dbo].[qn] q

Unfortunately following approach does not work as SQL Server has some known problems with CTE expressions in a function (semicolon before WITH solution). Unfortunately I'm not sure how to apply this solution to a function returning scalar, like this:

CREATE FUNCTION [dbo].[fn_qncatxml](@qnnumber INT, @qnversion INT)
RETURNS XML
WITH RETURNS NULL ON NULL INPUT
BEGIN
  RETURN
  (
    WITH [categories] AS
    (
      SELECT [qn].[number], [qn].[version], [cat].[catnumber], [qncat].[itemnumber], [cat].[parent], [cat].[description], 0 AS [distance]
      FROM [qn]
      LEFT JOIN [qncat] ON [qncat].[qnnumber] = [qn].[number] AND [qncat].[qnversion] = [qn].[version]
      LEFT JOIN [cat] ON [cat].[catnumber] = [qncat].[catnumber] AND [cat].[status] = '1'
   开发者_高级运维   WHERE [qn].[number] = @qnnumber AND [qn].[version] = @qnversion

      UNION ALL

      SELECT [categories].[number], [categories].[version], [cat].[catnumber], [categories].[itemnumber], [cat].[parent], [cat].[description], [categories].[distance] + 1 AS [distance]
      FROM [categories]
      JOIN [cat] ON [cat].[catnumber] = [categories].[parent]
      WHERE
        [cat].[status] = '1'
    )
    SELECT DISTINCT * FROM [categories] FOR XML PATH('')
  )
END

When I'll strip a part between WITH and FOR XML PATH(''), give some valid arguments and execute this block, it works perfectly.

Has anyone a clue how to make this CTE function syntax work in my scenario ?

CREATE FUNCTION [dbo].[fn_qncatxml](@qnnumber INT, @qnversion INT)
RETURNS XML
WITH RETURNS NULL ON NULL INPUT
BEGIN
  DECLARE @Ret xml;

  WITH [categories] AS
  (
    SELECT [qn].[number], [qn].[version], [cat].[catnumber], [qncat].[itemnumber], [cat].[parent], [cat].[description], 0 AS [distance]
    FROM [qn]
    LEFT JOIN [qncat] ON [qncat].[qnnumber] = [qn].[number] AND [qncat].[qnversion] = [qn].[version]
    LEFT JOIN [cat] ON [cat].[catnumber] = [qncat].[catnumber] AND [cat].[status] = '1'
    WHERE [qn].[number] = @qnnumber AND [qn].[version] = @qnversion

    UNION ALL

    SELECT [categories].[number], [categories].[version], [cat].[catnumber], [categories].[itemnumber], [cat].[parent], [cat].[description], [categories].[distance] + 1 AS [distance]
    FROM [categories]
    JOIN [cat] ON [cat].[catnumber] = [categories].[parent]
    WHERE
      [cat].[status] = '1'
  )
  SELECT @Ret = (SELECT DISTINCT * FROM [categories] FOR XML PATH(''))

  RETURN @Ret
END